Heathrow Airport Property

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1 Heathrow Airport Property Guide Price Rents 2013/14 Date: 27 th September 2013 Prepared by: Heathrow Airport Limited Status: Final

2 Contents 1.0 Introduction and Consultation Programme... 3 Purpose... 3 Background... 3 Consultation Programme... 3 Further Information Review of Responses and Decision Summary of Decision Implementation Timescale List of Respondents... 5 Appendix 1 Guide Price Rents 2013/14 Consultation Meeting Minutes... 6 Appendix 2 Heathrow Rental Guide Prices 2013/

3 1.0 Introduction and Consultation Programme Purpose 1.1 Heathrow Airport Limited (Heathrow) has reviewed the Property Rental Guidelines for 2013/14. The purpose of this document is to set out Heathrow s decision. 1.2 Heathrow has increased the Guide Price Rents by 2.09% for 2013/ The 2013/14 Rental Guidelines are effective from 1 st April Background 1.4 Since 1996 Heathrow has had a list of published Guide Prices. The Guide Prices are either a band or spot rent for the majority of standard property products. 1.5 Since 1996, Guide Prices have been adjusted by the percentage change in a rental formula, which is applied annually to the Guide Prices which was consulted with the AOC Rents Group. 1.6 In consultation with the AOC Rents Group the tariff rents were simplified in 2008 and the formula has evolved since it was first introduced. 1.7 The components of the current formula, revised in 2002, are as follows: Passenger Numbers. Retail Price Index. Investment Property Databank (IPD) Annual Property Index the average of Central, Outer and West of London Office Indices (see Appendix 1 for the geographical area). 1.8 The formula gives equal waiting to each component. 1.9 The formula seeks to provide consistent growth flattening the peaks and troughs associated with the external property market Desk licence fees are reviewed bi-annually on the same basis as rents, the next review is The consultation sought views on increasing rents by 2.09% Consultation Programme 1.12 The consultation was launched on 5 th July 2013 with the publication of the Consultation Document. An open consultation meeting was held on 15 th August 2013 to seek feedback on the proposals The consultation documents along with minutes from the consultation meeting have been available on the Heathrow website. Heathrow communicated the consultation documents to property users and the AOC via an communication sent out on 5 th July A subsequent was circulated on 10 th July 2013 to the same recipients reminding them of the consultation meeting on the 15 th August

4 1.14 The Consultation programme Heathrow has followed is: Date Milestone 5 th July 2013 Heathrow publish consultation document on Heathrow 2013/14 rental proposals 15 th August 2013 Consultation meeting 13 th September Property customer written responses due th September Heathrow publishes 2013/14 rents effective from 1 st April Further Information 1.15 This document informs all users of Heathrow s decision and concludes this Consultation on Heathrow Property Guide Price Rents 2013/ If you have any questions on the decision please contact: Heathrow Property Department Heathrow Airport Ltd The Compass Centre Nelson Road Hounslow Middlesex TW6 2GW property@heathrow.com 2.0 Review of Responses and Decision 2.1 Apart from the comments received during the consultation meeting held on 15 th August 2013 (A copy of the minutes, including a list of attendees, is attached at Appendix 1) there was one response received from Singapore Airlines. 2.2 A summary of the responses, together with Heathrow s response is set out below. User Comment How will the proposed increase in Guide Prices affect the rent I pay on my existing accommodation? Why do check-in frontage rates appear in the Guide Prices given they are not let by Property? Will Heathrow be reviewing the rental formula as it now consults with the wider airport community, including operational tenants other than airlines, who were not involved in the original rent guideline discussions. Heathrow Response The Guide Prices will apply where there is a rent review (usually 3 yearly) in the property agreement or where there is a new letting. The frontage rates for check-in are used as part of the overall check-in charge and are reviewed every 2 years. The next review of desk charges will be in 2014/15. Heathrow has no current plans to review the make-up of the Guide Price formula. The formula is part of Heathrow s Q6 submission. What is the process for changing the rental Any suggestions should be made in writing 4

5 formula which determines the Heathrow Guide Prices, in particular the relevant geographical areas from which the IPD figures are collated. Are the 2013/14 Rental Guide Prices relevant to T2. however because Heathrow is regulated and forecasts income over a 5 year regulatory period any change would need to be looked at in this context. The Guide Prices for T2 track the main Guide Prices and will be added to the main Guide Price schedule in 2014 when the Terminal opens. 3.0 Summary of Decision 3.1 The decision is to increase the Rental Guide Prices by the 2.09%, calculated using the rental formula, with effect from 1st April A full schedule of the rents is attached at Appendix Implementation Timescale 4.1 The 2013/14 Guide Prices are effective from 1st April 2013 and will be implemented immediately for any property rental transactions effective from this date. 5.0 List of Respondents 5.1 Apart from the comments received at the consultation meeting Heathrow received one response from Singapore Airlines. 5

6 Appendix 1 Guide Price Rents 2013/14 Consultation Meeting Minutes 15 th August 2013 Meeting title/subject: 2013/14 Heathrow Guide Price Rents Consultation Meeting location: Hong Kong Meeting Room, Compass Centre Present: John Arbuckle (JA) Pauline Sharkey (PS) Clive Redding (CR) Andrew Gilling (AG) Kevin Jones (KJ) Caroline Dzanob (CD) Laura Halle (LH) Kibae Kim (KK) Karen Ehrhart (KE) Yiorgos Peroutseas (YP) Heathrow Airport Heathrow Airport - Minutes LSH on behalf of Virgin Atlantic Airways and DNATA AOC Rents Group Malaysia Airways PHE CBRE on behalf of British Airways and Singapore Asiana Airlines CAA Yotel Minutes: 1. Introduction to Consultation Action JA welcomed everyone to the consultation meeting to review and discuss the Heathrow Property Rents 2013/2014 Consultation Document. JA recapped on the Property Rents Consultation process for 2013/2014, explaining that the purpose was to set out Heathrow s annual proposal for the level of property rents and invite Heathrow property users to provide views on the proposal. JA reminded all attendees that the closing date for written comments is 13 th September Heathrow will publish the outcome of the consultation by 27 th September JA said he would take everyone through the consultation document and invited questions. AG raised on behalf of the General Secretary of the AOC (Jim Hunter) whether Heathrow intended to issue Minutes for the Meeting given that none had been produced following last year s meeting. JA confirmed it was Heathrow s intention to distribute Minutes. JA talked through the Property Rents Consultation document, outlining Heathrow s proposal to increase property rents for 2013/2014. JA explained that Heathrow is proposing to increase property rents for 2013/2014, the rental formula has produced an overall increase of +2.09% for 2013/14 over 2012/13. 6

7 Minutes: Action 2. Consultation Responses AG queried the inclusion of Check In Desk frontage rates in this year s guide prices as Check In Desks were not let by Property and charged based on CUTE. JA confirmed this point and clarified that the consultation document includes the guide price schedules which contains all guide prices and non check-in desk licence fees; however as non check-in desk licence fees are reviewed biennially and were reviewed in 2012, they will not be reviewed this year. CR enquired whether Heathrow would be reviewing the rental formula as it now consults with the wider airport community, including operational tenants other than airlines, who were not involved in the original rent guideline discussions. JA confirmed that Heathrow had no plan to change the rental formula. AG enquired on the process for changing the rental formula which determines the Heathrow property guide prices, in particular the relevant geographical areas from which the IPD figures are collated for example something a little more Heathrow centric, given Airport Industrial building mirror local industrial areas?. JA advised that any suggestions could be made in writing however because Heathrow is regulated and forecasts income over a 5 year regulatory period any change would need to be looked at in this context. AG accepted this but pointed out that IPD geographical area had previously been changed as part of Rents Group consultation in AG enquired whether questions raised at the meeting also needed to be formally submitted to Heathrow, or whether Heathrow would take these on board as part of the consultation. JA confirmed it would be helpful if feedback on the consultation was put in writing, but would seek to capture any under the Minutes. LH asked whether Heathrow will reply to any written comments which they receive after the closing deadline of 13 th September. JA confirmed that all comments on the consultation should be submitted by 13 th September. User comments along with Heathrow responses will be contained within the published consultation outcome (excluding commercially confidential information), issued no later than 27 th September. AG asked how many invitations had been sent out by Heathrow given the low turnout, albeit peak summer holiday period? JA confirmed that all Property Customers have been sent an notifying them of the consultation. JA KK asked whether the 2013/2014 guide prices were relevant to T2. JA confirmed that the guide price rents for T2 would be added to the guide prices in April 2014 prior to the terminal opening in June Terminal 2 guide price rents in 2013/14 prices are attached for information below: Terminal 2 /sqft 2013/14 /sqm CIP - T2A CIP - T2B

8 Minutes: Action T2A - Landside offices/support accommodation T2A - Airside offices/support accommodation T2A - Airside apron level support accommodation (Ramp) T2B - Airside offices/support accommodation T2B - Apron level support accommodation (Ramp) Other JA thanked those present for attending the consultation meeting and reminded all that the final date for any written comments is 13 th September, with the outcome of the consultation published by the 27 th September

9 Appendix 2 Heathrow Rental Guide Prices 2013/14 Effective from 1st April 2013 Rent / sq ft Rent / sq M Min Max Min Max Terminal 1 Second floor office CIP Piers - standard ramp Piers - first floor Terminal 3 North Wing South Wing East Wing Departures ground floor R/O check-in Departures ground floor off back corridor Infill Offices CIP - Departures CIP - Arrivals Piers - standard ramp Building 820 First and Second Floor Ground Floor Bays D'Albiac House Bays Offices (Outer offices)

10 Offices (Inner offices) Terminal 4 NE Extension, Balcony Departures rear of check in Mezzanine airside Standard ramp CIP Terminal 5 CIP - T5A CIP - T5B/C T5A - Landside offices/support accommodation T5A - Airside offices/support accommodation T5A - Airside apron level support accommodation (ramp) T5B/C - Airside offices/support accommodation T5B/C - Apron level support accommodation (ramp) Desk Frontage Rates - All Terminals Check-In , Sales and Reservation 1, , Transfer , Information , Unless otherwise stated: The rents are exclusive of Maintenance Rent and Heating Rent or Service Charge. All rents (except CIP) assume measurement based on net internal area. A discount of 10% is given for No Natural Light, unless all the accommodation in the category has no natural light. Where there is a price range, actual charge will be based on the overall quality and location of accommodation. Typically, new build will be at the top of range. 10

Heathrow Airport Property Rents 2013/14 Consultation Document

Heathrow Airport Property Rents 2013/14 Consultation Document Date: 5 th July 2013 Prepared By: Heathrow Airport Limited Status: Final Page 1 of 11 Heathrow Airport Property Rents Consultation Heathrow